What's Holding Up Housing?

April 10, 2002

Now is a reasonably good time to refinance a home, but it's less clear whether this is the right time to buy. At least, that's the view of the nearly 1,200 people who responded to our Mar. 27 Reader Survey.

Approximately 68% of the respondents said they would refinance now -- and an additional 12% have already done so. About 60% said they would refinance to lower their monthly mortgage payment, while 19% said their motivation would be to shorten their loan term. Only about 7% said they would refinance to borrow more money against their property. Some 67% of those who responded said they already own a home.

SAFER THAN STOCKS? By a narrow margin of 39.5% to 36.9%, respondents said this isn't a good time to buy a home -- presumably because of the recent runup in prices across the country (see BW, 3/11/02, "The Homes Keep Selling") or perhaps beause of uncertain job prospects.

And for the most part, those who might buy said they would approach the purchase prudently. For instance, nearly one-third would buy now to take advantage of low interest rates, 22% would trade up after capturing the appreciation in their current home, and 20% would buy simply because they need a house. Only 11% would buy a home because they see it as a safer investment than stocks.

Moreover, some 65% of those who responded would make a down payment of 20% or more. And 71% would want a mortgage payment of no more than 30% of their gross income -- within the guideline that most experts suggest. Interestingly, 47% said they would use savings for a down payment, while 35% said they would use profits from an existing home. Only 6% would rely on stock market winnings.

Those who responded to this unscientific survey (so-called because anyone who wishes to can participate) ranged in age from their 20s to 55-plus, though the largest concentration -- about 53% -- gave their age as between 25 and 39.

Here are the complete results:

Do you currently own a home?

Option

Total

%

Yes

816

66.67 %

No

408

33.33 %

Do you think now is a good time to buy?

Option

Total

%

Yes

453

36.95 %

No

484

39.48 %

Maybe

234

19.09 %

Don't know

55

4.49 %

Do you think now is a good time to refinance a home?

Option

Total

%

Yes

827

67.79 %

No

99

8.11 %

I've already refinanced recently

152

12.46 %

I don't own a home

142

11.64 %

What's the best reason for refinancing now?

Option

Total

%

Lower the monthly mortgage payment

718

59.14 %

Borrow more money against the property

86

7.08 %

Shorten the term of the loan

227

18.7 %

I don't own a home

158

13.01 %

Not sure

25

2.06 %

If you were to buy a home now, what would your primary reason be?

Option

Total

%

To invest in something safer than stocks

132

10.89 %

To take advantage of low mortgage interest rates

400

33.00 %

To buy before home prices go too high to afford

174

14.36 %

To capture the appreciation in a home you own now and use it to trade up or trade down

262

21.62 %

A simple need for shelter

244

20.13 %

If you were to buy a home today, what size down payment would you make as a percentage of the purchase price?

Option

Total

%

50%

176

14.39 %

30%

182

14.88 %

20%

445

36.39 %

10%

235

19.22 %

5%

135

11.04 %

0%

50

4.09 %

If you were to buy a home today, where would you get the down payment?

Option

Total

%

Savings

575

47.21 %

Stock market profits

73

5.99 %

Borrow from family and friends

47

3.86 %

Sell an existing home

436

35.8 %

I can't afford a house right now

62

5.09 %

Not sure

25

2.05 %

What percentage of your gross monthly income are you willing to spend on a monthly mortgage payment?

Option

Total

%

20%

333

27.32 %

30%

542

44.46 %

40%

160

13.13 %

50%

77

6.32 %

Other

53

4.35 %

Not sure

54

4.43 %

If you bought a home today, how would you expect its value to change over the next five years?